Tanzania hit British mining company with fine worth two centuries of revenue

Source:Quartz Media

Date:1st-august-2017 Time: 6:07:39 pm

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The future of the largest mining company operating in Tanzania has been thrown into doubt following a hefty $190 billion fine.

Acacia, the London-based gold mining firm, was hit with the extraordinary fine by Tanzania’s government for allegedly operating in the country illegally and also for failing to fully disclose its export earnings over a 17-year span between 2000 and 2017.

The bill is split into $40 billion in unpaid taxes and an additional $150 billion in interest and penalties. The allegations are based on the findings of government-appointed committees. Last month, after the outcome of the government-ordered audit of the mining industry was released, John Magufuli, president of Tanzania, described Acacia’s operations in the country as a “kind of exploitation.”

The $190 billion fine represents round 40 times Acacia’s total revenue last year, nearly two centuries worth of revenue or four times the size of Tanzania’s GDP. In comparison, the mining sector contributed just 4% of Tanzania’s GDP in 2015. Acacia’s stock price has seen a slow slide since the audit report was released last month but news of the fine has wreaked havoc on the stock price which has since fallen sharply.

Acacia has been previously caught in the government’s cross-hairs as, back in March, a ban on exports of gold and copper concentrates hit the company hard, reportedly costing it $1 million in daily revenue. With news of the hefty fine, the company’s relationship with the government will likely come under further strain. Acacia is majority owned by Barrick Gold, a Canadian firm.

For its part, Acacia, while refuting the government’s findings, “re-iterates that it has fully declared all revenues” and has warned that the 40,000 jobs dependent on its operations are “under threat.” In the meantime, the company says it is “considering all of its options and rights and will provide a further update in due course.”

It’s not the first time in the past 15 months that a foreign-owned firm has been hit with a hefty fine by an African country. Last October, Chad Republic fined Exxon Mobil $74 billion—almost seven times its GDP—and just over a year ago, MTN, Africa’s largest telecoms operator settled a sim card dispute with the Nigerian government for $1.7 billion after it was initially hit with a $5.1 billion fine.